Questions to ask startups before accepting a job offer
How to get the information you need to make a great decision
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Before making an investment, most professional investors complete something called “due diligence”. During this process, the investor investigates and verifies information about an investment opportunity. Effective due diligence helps you avoid bad decisions, and investors will often spend weeks on diligence about one specific investment before deciding to hand over money.
I have long wondered: Why don’t most job-seekers do the same?
Choosing which company to work at is arguably a more consequential decision than a venture capitalist choosing which company they should invest in. VCs have millions of dollars and invest in hundreds, or thousands, of companies (after which most VCs spend ~zero time doing anything for those companies). By contrast, joining a company is one decision you make that may take up a huge amount of your time for the next few years or decades of your life.
It’s at least a bit weird that most people ask very few questions of their potential employer. There are a bunch of reasons for this (e.g. it can feel scary, and the company holds some of the power). But the reality is that making a major life decision with scarce information makes things unnecessarily challenging.
Getting sufficient information is not that much additional work. We’re talking <1 hour. The upside to doing that additional work is potentially life-changing. You could save years of your life by avoiding joining a bad company.
Below we’ve put together the actual questions we recommend trying to understand whenever you are looking to join a startup. Even if you’re not looking for a job right now, it may be a useful exercise to try and answer these questions as you look at interesting companies. Can be an efficient way to understand markets and learn the dynamics of new industries.
Some of the below questions might seem too simple or obvious. That’s because the right questions to ask are rather straightforward. There is no one super-secret question that will save you. And even though the questions below are basic, most people don’t ask them. Figure them out before making a decision and you will have more confidence and less regret about your final choice.
We are not suggesting you ask all of these directly, but rather that you find a way to answer them somehow (which may sometimes be by asking directly).
Before diving in, really quickly, if you are looking for startups to join, you should check out Friends of Next Play. When you join, you get invited to our private Slack group where you’ll discover interesting opportunities, meet like-minded people, and get invited to useful events. You can join here.
Questions to ask before you join a startup
About the product
What does the product actually do? How has the product changed in the past month? Year? What’s the plan for the future? Can you try using the product to get a feel for how it works?
Who is the customer today? Why does the customer buy the product? What problem does it solve? Can you talk to any of their customers to understand their experience first-hand?
Who is your competition? What makes you different? What is your edge today? Will that change in the future?
About the business performance
What does success look like?
What is the revenue? What’s the nature of the revenue (transactional versus subscription)? How is the revenue growing? How has it changed over the past month? 6 months? Years?
How does the company expect the next 6 months to look? 12 months? 2 years?
How does the company think about profitability? How important is having runway? When will the company run out of money?
Who are the investors in the company? Why did they invest? Can you read their investment memos? Can you talk to them?
About the team
Who is the CEO of the company? What are they good at? What is their vision for the company?
Who is on the leadership team? What are they responsible for? What are they good at? Are they friends? Do they fight? What about?
Who would you be working with directly? What makes them great? Do they do real, impactful work?
Has anyone quit? Why? Has anyone been fired? Why? Has there been a layoff? Why?
About compensation
How is compensation determined? How often has this changed? How often will it change? How is the org structure determined? How are levels determined?
What is the type of equity? Stock options or grants?
If options, how much will it cost you to exercise them all today if they allow you to early exercise? Does QSBS play a role? What is the post-termination exercise window?
What are the benefits? Is there 401(k) matching?
About you
These are questions to answer for yourself, ideally in writing.
What is important to you as you think through this decision? What is less important?
Why do you want to join? [0]
What are your expectations for the role? Why?
What are your expectations for the company? Why?
What do you think of the people at the company? Why do you think those things?
Do your answers to these last three questions align with the reason you want to join?
It’s naive to expect an early-stage startup to have mature and permanent answers to every question. However, by asking these questions and others like them, you will be able to understand what parts of the business seem to be obviously de-risked and which parts still have a big question mark standing over them. The question marks are not red flags, but they are risks you should incorporate into your personal underwriting model.
There are no particularly right answers from the company—only data you can use to better inform your decision.
[0] This essay is not about giving advice around what company to join. But if your primary motivation for joining a startup is to become very wealthy, just know two things. Thing one is that the odds your equity ever turns into meaningful money are very low, both because most startups never exit and because even when they do, you are not guaranteed millions. Most people who joined Instacart after Series B saw a worse return than if they’d just been paid in all cash and invested in the market. This is not uncommon. Thing two is that there are much clearer paths to becoming at least moderately wealthy (investment banking, Big Tech, consulting, real estate, literally 1000s of other jobs).
I looked at this from the perspective of a Product Manager earlier in a post and there are definitely lots of touchpoints here!
Great article, I really enjoyed it and read twice! Quick question, considering a situation where the product is quite vague to your understanding, how you do weigh the pros and cons of joining the firm or the viability of that startup achieving product market fit? Second question, how would you approach doing a due-diligence on the dynamics of team members if you dont know the company well?